Port Financial Update
Commission Retreat, June 4, 2020

Overview
COVID-19 has significantly disrupted major Port business segments:
Airline and non-aeronautical activity at SEA
Cruise business
NWSA is also at risk due to economic impacts on trade flows
Initial financial planning and analysis have focused on 2020 impacts
and responses
Planning horizon is now being extended to 2021 amidst significant
uncertainty

April Federal Reserve Minutes Highlight
Uncertainty and Risks
In addition to weighing heavily on economic activity in the near term, the
economic effects of the pandemic created an extraordinary amount of
uncertainty and considerable risks to economic activity in the medium term.
One area of particular concern is what should happen in the event that
coronavirus infections should surge later in the year. The minutes noted that
the "more pessimistic" outlook for a rebound was probably as likely as the
baseline forecast for improvement.
In this scenario, a second wave of the coronavirus outbreak, with another
round of strict restrictions on social interactions and business operations,
was assumed to begin around year-end, inducing a decrease in real GDP, a
jump in the unemployment rate, and renewed downward pressure on
inflation next year.

"Make no mistake, we have a long way to go. This virus will be with us
for a long time."
- World Health Organization, April 2020

Range of Recovery Scenarios (McKinsey)

The difference between outcomes is material.

US real GDP, indexed, Q4 2019 = 100
-=-= Pre-COVID-18  Scenario A3     Scenario Al

110                                                                                     Cumulative loss in real GDP,
$ trillion, 2012 dollars
ad
105                                                                           a3[OF



95                                                                                      $5.0
trillion111i
C90
Difference in cumulative
GDP loss between
A3 and Al scenarios
85

Q4  Q1  Q2  Q3  04  Qf  Q2  Q3  Q4  QO  Q2  Q@3  O04  O

2019       2020               2021               2022       2023

Source: McKinsey analysis in|           with Oxford Economics

McKinsey
& Company

Assessment of Port Businesses Based on
Primary Risk Impacts
Virus         Economy
Aeronautical      Significant    Moderate      Aeronautical cost recovery provides some long-term
businesses                                     protection to Port revenues; Airlines average 9-11
months liquidity to manage economic
downturn; significant downsizing expected along
with potential bankruptcies
Non-aeronautical  Significant    High           Small businesses are particularly vulnerable
businesses
Cargo            Limited      High          Underlying competitive risks remain
Cruise             Significant    Moderate      Historically recession resistant
Conference       High         Moderate      Low margin business with variable cost structure
Center
Other            Varies       Moderate     Varies depending on type of business

Planning Scenarios
Staff has prepared three scenarios with ranges of potential outcomes. All are
reasonably possible
Aviation
Baseline  assumes enplanement recovery begins later this year, 2021 still weak but
significantly better than 2020
Scenario 2  assumes that gradual enplanement recovery begins in early 2021
Scenario 3  assumes enplanement weakness well into 2021, then a gradual recovery begins
Non-Aviation
Scenarios vary full-year reductions in revenues versus 2020 budget forecasts
There are other scenarios that could be better or worse; these provide a
reasonable range to inform decisions
Scenarios include assumptions about Airport traffic, cruise activity, NWSA
performance, stresses on other non-Airport businesses

Key Financial Metrics
Long standing policies designed to provide resilience in the face of
temporary adverse conditions:
Minimum Target Operating Fund Balances
Airport Development Fund  10 months of O&M expense
General Fund  6 months of O&M expense
Revenue Bond Debt Service Coverage (annual net income/debt service)
Airport  1.25x
Non-Airport Businesses  1.8 x
Tax Levy has no specific minimum balance
Port-wide debt service coverage requirement is also included in bond
covenants and is evaluated by credit rating agencies

Pre-Covid Financial Metrics Scorecard
2019 Year End  2019 Target      Result
Ending Airport Fund Balance            $307M       $314M          Met
Airport Coverage                        1.68x         1.25x        Exceeded

Ending Non-Airport Fund Balance       $156M        $45M     Exceeded; 3.5x
Non-Airport Coverage                  1.33x         1.8x         Not met
Airport coverage supported overall Port-wide coverage
Non-airport fund balance provides liquidity for debt service despite low coverage

Aviation Division

Projected Enplanement Scenarios   Compared to 2019
Monthly Comparison to 2019 Levels                          Scenario   2020   2021
Baseline    -61%    -30%
2      -66%    -36%
3      -66%    -46%

Current Passenger Decline
much greater than
9/11/2001 and 2008/9
Great Recession
4-year recovery after 9/11
3-year recovery after 2008
Great Recession
Recovery after Covid-19
uncertain, but likely 3-5
years
Airlines have indicated they
will emerge smaller from
Covid-19

Airport Financial Objectives for 2020-21
Cash flow  maintain debt service coverage > 1.25x to avoid debt
service surcharge to airlines
Liquidity  Rebuild ADF target balance of 10 months of O&M (likely
need more going forward)
Minimize airline annual deficit for 2020 (airlines seek zero)
Moderate growth of airline costs in 2021 (airlines seek flat rates)
Support non-airline tenants and customers
Optimize TSA, FEMA and CARES Act grant reimbursements
CPE likely not an important consideration during recovery

Summary of Financial Scenarios
2020 Budget                BASE case                       Scenario 2                      Scenario 3
in $000s                                                           2020           2021               2020           2021               2020          2021
Aero revenues                               401,340            318,312        424,268            319,747        425,259          321,976       429,323
Aero debt service coverage                                                                              14,179          19,097             13,904         46,503
Non aero revenues                           283,167            113,650        187,010            100,873        171,902           100,873       149,370
Total operating revenues                      684,507             431,962         611,278             434,800        616,258           436,754        625,196
Operating expense                           377,306             348,826         339,555            348,826        339,555          348,826        339,555
Net operating income                         307,201              83,136         271,723              85,973        276,703             87,927        285,641
CARES grant non-operating                         -               173,133          19,000            173,133         19,000            173,133        19,000
Net operating income after CARES             307,201             256,269         290,723            259,107        295,703           261,061        304,641
Airline surplus/(deficit) at year end                                      (44,869)                               (65,415)                             (66,935)
Debt service coverage                                                  1.29            1.27                1.25            1.25               1.25            1.25
CPE                                $      13.23      $      28.63  $       21.74      $      35.37  $      25.10      $     35.57  $      32.23
CARES grant critical for maintaining debt service coverage, moderating airline costs and airline deficit in 2020
Non-aeronautical revenues decline 60% in base case, tracking closely the reduction in passengers
Assumes 2021 O&M budget is 10% lower than 2020 approved budget (modeling assumption)
2021 Aero revenues increase due to increasing capital costs (primarily debt service).
Scenarios 2 and 3 require charging airlines for debt service coverage in rate base to achieve 1.25x

Airport Will Not Meet Minimum Fund Balance
Include $192 million
CARES grant
Months of O&M
Scenario    2020     2021
Target       10.0          10.0 
Baseline        6.4        7.7
2          5.9       7.7
3          5.8       7.8
Months of O&M + Debt Serv.
Scenario    2020     2021
Budget        6.0
Baseline        3.8        4.1
2          3.4       4.1
3          3.4       4.2

Issues and Concerns
Airlines seeking zero net year-end deficit for 2020
Requires using 100% CARES grant in 2020 and reducing costs ~$45 million in 2020
Projecting significant increase in airline payments for 2021 under all
scenarios, while airlines push for flat rates
Increasing debt service for such projects as IAF and NSAT
Lower PFCs increases debt service to be recovered in airline rate base
With lower activity, this means higher rates
Risk of customers not able to repay deferred 2020 rent/fees
Risk of bankruptcy could impact cash flow
Hertz filed for bankruptcy on May 22
Alaska and Delta considered lower risk
Need to revisit capital plan and funding plan for 2021  2025
2021 budget must support safe environment for passengers and workers
Cost of implementing FlyHealthy@SEA - TBD

Non-Aviation

COVID-19 Impact to Maritime and EDD Businesses
Cruise-
EDD and Maritime COVID-19 Revenue
Force Majeure clause exercised at the Pier 66 cruise terminal in 2020.
Scenarios
in $MMs                            Incremental cost savings from lower passenger volumes likely offset
100                                                                  by additional COVID-19 related investments
No passengers forecasted in 2020. Passenger forecasts for 2021 are
90
the following:
80                                                                   1.  Baseline = 75% of previously forecasted
70                                                                   2.  Scenario 2 = 25% of previously forecasted
3.  Scenario 3 = No passengers
60                                                        Marinas 
50                                                                 No rate increase 2021
Conference & Event Centers  Based on feedback from Columbia
40
2019 Actual                  2020                     2021                   Hospitality with Port margins 15-20%
Commercial Property Leasing Portfolio  Based on CoStar projections.
Budget / Plan of Finance                          Expected reductions of 8%-10% in 2020 phasing down over 4 years
Baseline                                     Parking  About 1/3 of revenue is fixed.
Scenario 2

Key metrics driving revenue reductions                           Baseline                      Scenario 2                     Scenario 3
Year                                                    2020        2021            2020        2021            2020        2021
Cruise Passengers (vs 2020 budget/Plan of Finance)             0.0%        75.0%             0.0%        25.0%             0.0%         0.0%
Conference Centers (vs 2020 budget/Plan of Finance)         25.0%       65.0%           15.0%       50.0%           10.0%       35.0%
Commercial Prop. (Vacancy Rate/bad debt increase)            7.7%        6.0%             8.7%        7.0%             9.7%        8.0%
Parking traffic at Bell Harbor Garage                            60.0%        90.0%             40.0%        60.0%             25.0%        40.0%

NWSA
NWSA is the largest source of income for non-Airport businesses
Approximately 70% of NWSA revenue is derived from fixed payments
such as minimum annual guarantees
NWSA recently provided an updated scenario for 2020  this is
included in the Baseline
Pos staff added the following scenarios for 2021:
Baseline - 2021 revenues are flat relative to 2020
Scenario 2  revenues are 10% lower than the Baseline
Scenario 3  revenues are 20% lower than the Baseline

Non-Aviation Capital Funding is at Risk


General Fund cash above minimum target is a CIP funding source in the Plan of Finance
Debt service not covered by operating cash will draw down the General Fund balance
General Fund Balance may be at or below its minimum by 2022
No ability to add new revenue bond debt to fund capital investments until coverage is above
1.8 times, reducing capital funding capacity

Tax Levy
There is no minimum target balance
Tax levy pays G.O. bond debt service
Estimated Maximum levy in
2021 is $108.7 million (42% increase)              Plan of Finance estimated an
additional $200 million of G.O. bonds
to fund non-Airport capital
investments
$150 million of that will be now be in
the form of a bank line of credit to
provide liquidity
Use of that line of credit for
operations or Airport support will
reduce G.O. bond funding for capital
Plan of Finance assumed full use of
the Tax Levy over the next five years

Tax Levy Uses 2020-2024 (Pre-Pandemic)
Tax levy Sources and Uses ($ mil)
Updated for Year-end 2019 results                                         2020 levy is $76.4 million
Sources                                                          Assumes a 3% per year tax
Beginning balance                                           15.1
Annual levy                                                  403.0            levy increase in 2021-2023
Environmental Recoveries                                  33.3
Total Sources                                           451.5         Assumes $200 million of
Uses                                                         additional capital is funded
G.O. Bond debt service (1)                                  242.1            with new G.O. bonds
Capital Spending - Non-Airport Investments (2)                 56.7
Environmental Remediation                                 88.4
NWSA Membership Contribution (net)                       16.0
Community Support (3)                                     48.2
Total Uses                                              451.5
Ending fund balance                                          (0.0)
(1) Includes $200 million of new G.O. bonds.
(2) An addition $200 million of capital investments would be funded
with G.O. bond proceeds
(3) Includes capital investment in Highline School noise mitigation

Increasing the Tax Levy Provides Additional
Funding Capacity
Funding Provided
$ million                   Cash Only       Cash &
(1)          Bonds (2)
Budget                    113         256
5% annual increase           128           320
10% annual increase          166          450
Maximum one-time         221         630
(42% increase)
(1) Assumes no bonds and no new debt service
(2) Bonds provide funding, but increase debt service
and reduce cash available to fund capital
NOTE: Scenarios are based on the Budget as of year-end and do not reflect changes due to COVID-19

Issues and Concerns
Likely inability to pay non-Airport debt service from revenues; cash balances will
be drawn down to pay debt service
Inability to issue revenue bonds and draw down of General fund cash will have a
significant impact on the ability to fund the CIP
Risk that bankruptcy of one or more major tenants will reduce or delay payments
Weak economy could further erode the NWSA's competitive position
Economic or other concerns could put tenant's exercise of T-5 Phase II option at
risk
A slow cruise recovery will impact Maritime revenues and potentially delay the
need for a new terminal at T46 (Port pays approximately $2 million a year net to
NWSA)
Use of non-Airport resources to support other needs will further reduce CIP
funding

Tools to Manage the Next Planning Phase
Reduce operating expenses
Reduce/delay capital investments
Increase tariffs and fees
Increase tax levy
Utilize Non-Aviation resources to support the Airport (but not the
reverse)
Strategic use of new bank facility

Additional Information

Non-Airport Businesses
$ million                                               Budget                      Baseline                         Scenario 2                       Scenario 3
2020              2020        2021            2020       2021           2020        2021
NWSA Distributed Income (1)                            40.04              34.10         34.10             30.69        30.69              27.28         27.28
Maritime                                            62.94             36.57        57.50            36.47       43.88             36.36        37.01
Economic Development                              19.11             10.52        16.70             9.16      14.35             8.38        12.17
Total Revenue                                       122.08              81.19        108.29             76.32       88.92             72.02         76.46
-                         -                 -                       -                -                        -                  -
Operating Expense (2)                                   (88.50)             (78.27)        (85.67)            (77.44)      (84.15)            (77.02)        (82.63)
-                         -                 -                       -                -                        -                  -
Net Operating Income before depreciation                33.59                2.91         22.62              (1.12)        4.77             (4.99)         (6.18)

NWSA cash adjustment (3)                               7.70               7.54         10.55              7.54        10.55              7.54         10.55
Debt Service                                            (35.97)             (35.97)        (37.15)            (35.97)      (37.15)            (35.97)        (37.15)
Debt Service Coverage                                    1.15                0.29          0.89              0.18         0.41               0.07         0.12
Cash flow                                               5.32              (25.52)         (3.98)            (29.55)      (21.83)            (33.43)        (32.78)
(1) net of depreciation and net of the Port's approx. $2 million T46 payment
(2) includes unallocated expenses
(3) depreciation expense added back to coverage calculation